UAE’s New Family Business Law To Come Into Effect In January 2023

This year the UAE ministry of economy shared details of a new family business law that aims to enhance the country’s position as a family business hub. The law, which will come into effect in January 2023, will maintain the sustainability of companies for generations to come and is also speculated to aid significantly in the smooth transition of the management of the company from one generation to another while attracting more businesses to set up their operations. Leading investment firms admit that the impact of this law on economic growth looks very promising, as 90% of the private companies in the UAE are family-owned businesses. 

The Role Of Family Business In The UAE 

Family businesses are a major economic growth driver in most countries. They also play a primary role in establishing new firms, attracting investments and creating job opportunities in various industries in the UAE.  

They account for 70% of the private sector companies globally, 60% of the global workforce and 70% of the global GDP. Moreover, 90% of the total number of family-owned private companies in UAE and their investments cover thriving local markets such as real estate, retail trade, tourism & hospitality, technology, shipping and logistics services. 

UAE is the only country that has initiated legislation to regulate and sustain the operations of family businesses in the region. Through this first-mover advantage, UAE hopes to consolidate and enhance the country’s position as a foremost and preferred destination for family business investment opportunities and projects regionally and globally. 

The New Law 

According to the Law, a family-owned business is defined as a company established in line with the provisions of the “Commercial Companies Law” in the UAE and also registered in the unified family business registry. 

On how the new law is different from the existing law, legal experts say the current law does not apply to family-owned businesses where non-family or third parties own more than 40% of shares. The new law applies to family-owned businesses on an opt-in basis for owners or co-founders by submitting a request to the Department of Economic Development (DED).

The law states that no partner can dispose of the share to a person outside the family or outside the framework of the law unless with the approval of all the partners. If a person from outside the family owns shares or equities in the firm for any reason, then the company should recover such shares at a fair market value. 

Key Highlights 

The law applies to all family-owned companies already operating in the country and the owners who own most of the shares in the family business who decide to register it in the unified register as a family company per the provisions of the law. It is also applicable to family-owned companies registered after the enactment of the law.

While the law applies to all Emirates of the UAE, there is an exception when local legislation regulates these companies in an Emirate. In such cases, the applicability of this new law is limited to the areas that are not regulated or stipulated by the local Emirate’s laws.

Considering the strong position UAE holds as an ideal business destination globally and the fastest-growing business hub in the region, there cannot be a better time than 2023 for family businesses to avail the amazing benefits of this new law.
 One best way to structure your business to adapt to this new legal framework while mitigating risks is to seek professional help. A financial advisory firm like the AIX investment group can help you choose the best options to safeguard your business viability and sustainability while boosting expansion plans, development, and effective transition from one generation to the next.